Bloemfontein - High inflation hurts the poor the most and needs to be tackled across southern Africa, South Africa's central bank governor Tito Mboweni said on Thursday.
Inflation accelerated at an alarming rate in southern African countries in 2008, driven by high food and oil prices, he said in a memorial lecture in Bloemfontein, about 250 miles south of Johannesburg.
This, together with large budget deficits and civil unrest in some countries, has left the Southern African Development Community (SADC) lagging well behind schedule to create a common monetary area by 2016.
"High inflation, as you know, is an indirect tax on the poor," Mboweni said. "When inflation is high, it is the poor that is hurt the most."
Zimbabwe suffered hyperinflation in the midst of an economic collapse before a new unity government allowed the use of foreign currencies.
Inflation reached double digits in most countries in the 15-member group, including South Africa where it peaked at 13.7% in August last year. Mboweni said inflation was likely to be less than 10% this year.
South Africa's consumer inflation has slowed sharply since mid-2008, but at 6.7% in July it remains outside the central bank's 3% to 6% target range.
Other SADC countries have also seen price pressures ease in 2009, allowing for interest rate cuts to help weather a global economic downturn, such as in South Africa, which has cut its repo rate by 5% points since December to help pull the economy out of recession.
Mboweni said SADC countries had to continue fighting inflation, while bringing down budget deficits and other imbalances, to make integration possible.
"Needless to say we are very much behind schedule."
Intra-Africa trade remained small and a free trade agreement that was meant to come into effect in 2008 had not been implemented, he said.
Customs union
The region is supposed to have a customs union in place in 2010, a common market by 2015 and a single currency in 2016.
To join the common monetary area, countries are expected to have stable inflation of between 3% and 5%, prudent fiscal policy with budget deficits of less than 3% of GDP, and policies in place to minimise market distortions.
No country meets all the requirements at this stage.
Mboweni said other problems were a lack of independent central banks and political will, and civil unrest.
There was also an over-reliance on aid, which made some governments too dependent on handouts.
Central banks should be accountable to the citizens of countries and not influenced by short-term political goals.
"It is important to have an independent institution that is accountable to the citizens of the country ... not dictated to by politicians. The credibility of the central bank is very important," he said.
Mboweni, who leaves his post in November, has jealously guarded the independence of the South African Reserve Bank, raising the ire of trade union allies of the ruling ANC for not cutting interest rates fast enough.
SADC comprises South Africa, Botswana, Lesotho, Swaziland, Namibia, Angola, Zimbabwe, Mozambique, Malawi, Tanzania, Zambia, the Democratic Republic of Congo, Seychelles, Mauritius, and Madagascar, which is currently suspended because of a coup.
- Reuters